What does a financial adviser do?
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Demand for financial advice in Australia is increasing. The 2024 Australian Advice Landscape Report by Adviser Ratings found that the proportion of 'unadvised' consumers thinking of getting financial advice rose to 24% from 20% the year before. This translates to about 2.3 million Aussies considering getting advice.
There are a few roadblocks, however. One is the cost. Adviser Ratings notes that most people can't afford or are unwilling to pay the average adviser fee. Another is the shortage of advisers "after a strong exodus from the industry in recent years".
If you are one of the millions of Aussies thinking about seeking financial advice, here's a look at some of the key things you should know.
What is a financial adviser?
A financial adviser, also referred to as a financial planner, is a qualified professional who can help you set financial goals and develop a plan to help you achieve them.
What does a financial adviser do?
There are a range of areas a financial adviser may be able to help with including:
- Wealth management and investment advice
- Retirement planning
- Superannuation
- Tax optimisation
- Life insurance
- Estate planning
You may also be able to get one-off advice on a particular issue rather than comprehensive advice based on your entire situation. For example, you may simply want advice on what to do with a redundancy payment or inheritance.
How much does a financial adviser cost?
The cost will depend on the level of advice you'd like to receive. Some of the things you may be charged a fee for include:
- Initial meeting: Generally, your first meeting will be free but some financial advisers will charge you a fee. This could be anywhere from $100 to $500.
- Creating and implementing a new financial plan: This could start as low as $1,000 for 'limited' advice on a particular topic or as much as $10,000 for more complex plans. CoreData FPA Member Research in 2020 found that the average initial cost to set up a financial plan was around $3,300 but given the high rate of inflation over the past few years this is now likely to be higher.
- Ongoing advice: The fee for ongoing advice will also vary based on the complexity of your situation. According to Adviser Ratings the median fee for ongoing advice was $3,960 a year in 2023 - an increase of 58% since 2018.
It's important to note that there are a number of different fee models including commissions, asset-based fees, fee-for-service or performance-based fees.
How do you find a financial adviser?
There are a few ways to look for a financial adviser. A good place to start can be asking for recommendations from family or friends.
Another option is to use Moneysmart's 'Financial advisers register' and search by postcode to find a licensed adviser near you.
You could also find a financial adviser through a professional association such as the Profession of Independent Financial Advisers (PIFA) or the Financial Advice Association Australia (FAAA). Both offer a directory on their website that helps you find a financial adviser in your area.
Finally, you could reach out to your super fund as they are likely to have advisers on staff who may be able to help you.
Tips for choosing a financial adviser
When you are narrowing down your options, it's important to check that the adviser is licensed using the 'Financial advisers register' on the MoneySmart site. This will also show you where a financial adviser has worked, their qualifications and training, whether they are members of professional bodies and what products they can advise on.
It's also a good idea to take a look at the Financial Services Guide. This will show you who owns the company so that you can make sure there are no conflicts of interest.
Then it's a matter of setting up meetings with a few advisers to find the one that best suits your needs. As mentioned earlier, most advisers will do this initial meeting for free but be sure to double-check.
When you meet an adviser, some of the topics you should ask them about include:
- Their qualifications
- How much experience they have
- Whether they have any specialty areas
- The types of products they offer (or don't offer) advice on
- What fees you'll pay
- What commissions or incentives they will receive if they sell a financial product
As well as how they respond to your questions, consider how they made you feel during the meeting - did you feel comfortable and listened to?
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